For the first three months of the year, sales were $301.7 million versus $344.1 million reported for the corresponding period of 2001. Net income was $19.5 million and diluted earnings per share were $.33 as compared to $21.1 million and $.36, respectively, last year.
Included in the current results were contributions from two recent acquisitions: MyTech Corporation on October 31, 2001, and Hawke International on March 4, 2002. Also included were expenses incurred during the quarter under the Company's previously announced capacity reduction program and a favorable adjustment to the previously recorded gain on the sale of Hubbell's WavePacer DSL assets. The combined special charge expense and gain on the sale of business contributed $0.7 million in pre-tax income or less than one cent per share. Effective at the beginning of 2002, the Company adopted FASB 142 and is no longer amortizing goodwill from acquisitions; the contribution to the quarter was $2.1 million in pre-tax income or three cents per share. Hubbell will continue to amortize other acquisition related intangibles and costs.
Also of note during the quarter was Hubbell's definitive agreement announced March 20, 2002, to acquire LCA Group, Inc., the domestic lighting division of U.S. Industries, Inc. The proposed transaction was granted early termination by the Federal Trade Commission on April 5, 2002. Hubbell expects to close the acquisition during the second quarter 2002.
OPERATIONS REVIEW"Hubbell made substantial progress during the quarter toward our two primary objectives: reducing costs and building future opportunities," said Timothy H. Powers, President and Chief Executive Officer. "Actions under the former with new initiatives announced earlier this year are on schedule with plant consolidations well underway in the United States, Mexico, and Puerto Rico. The benefits of these cost reductions will begin to appear later in the year. When the restructuring program is complete, we expect annual savings approaching $20 million going forward."
"Concurrent with continuing slow demand in today's markets are exceptional opportunities," Powers added. "Our objective is to substantially expand Hubbell's leading position in its core markets with accretive acquisitions. And we're meeting that objective. Late in 2001, we added MyTech Corporation, noted for its technological innovation in occupancy sensing for lighting systems. In March of this year, Hawke International, the global leader in brass cable glands for harsh and hazardous locations, joined Hubbell and is expected to add $20 million in revenues with double-digit profit margins in its first full year."
"Most significant," Powers continued, "will be the addition of the LCA lighting operations. Once completed, this acquisition will bring a group of brand names that is second-to-none in the lighting industry including Columbia, Dual-Lite, Prescolite, Kim, Spaulding, AAL, and Progress Lighting. Added to the prominence of our Hubbell brand names serving the same markets, this group of operations will move Hubbell into the top tier of lighting fixture suppliers, generate nearly $600 million in annual sales, and immediately add to Hubbell's earnings."
SEGMENT REVIEWContinued slow demand across most markets impacted year-over-year sales and operating profit comparisons for each of the Company's three segments in the first quarter of 2002. The percentage comparisons which follow in this Segment Review exclude the effects of special charge expense and the gain in the first quarter 2002, and of goodwill amortization in the first quarter 2001.
Sales in the Electrical Segment declined by 12% and operating profit by 18% as industrial and commercial markets remained at the lower levels of a recessionary economy. Within the segment, however, some operations reported positive comparisons. The Raco/Bell unit reported modestly higher sales and substantially higher profitability due to increased market share, lower costs, and the unit's emphasis on customer service and delivery. Also impacting segment results, especially at Hubbell Lighting, was a lower level of reported non-residential construction with activity in the first two months of the year down by 11% compared to the same period last year.
Sales and operating profit for the Power Systems segment declined by 9% and 16%, respectively. Contributing to the quarter was Power Systems' responsiveness following a January 2002, ice storm in the Midwest. Utilizing its pre-planned emergency response program, Power Systems coordinated deliveries - most overnight - from its Centralia, MO headquarters and other plants to utilities in seven states. Included were more than one million insulators and surge arresters, connectors and splices, and pole line hardware and fastener components. Conflicting signals, however, remain the norm in utility product markets. On the positive side excluding storm-related volume, daily bookings in March firmed at modestly higher levels compared to those of the preceding four quarters. Many end-users and distributors, however, see continued weakness in current conditions and less than robust projections for the remainder of the year.
Hubbell's Industrial Technology segment reported a 23% decline in sales and 52% lower operating profit. A continuing low level of capital expenditure across most industries depressed order input to the segment. While some macro-economic indicators have begun to show positive trends in recent months, plant capacity utilization, a driver to this segment, stood at 75.4% in March versus an average of 81.8% during the expansion of the 1990's. Continuing progress for the segment in plant consolidation and cost reductions should help to improve returns even in the current slow markets.
On January 1, 2002, Hubbell adopted SFAS No. 142, "Goodwill and Other Intangible Assets", which requires companies to stop amortizing goodwill and certain intangible assets with indefinite useful lives, and requires an annual review for impairment. Upon adoption, Hubbell discontinued the amortization of goodwill.
The elimination of goodwill amortization will contribute about $.10 per share to 2002 earnings compared to 2001.
Management is currently assessing the impact the new standard will have on its goodwill in accordance with the transition provisions of this standard. Application of this standard may result in impairment of goodwill related to the company's businesses. Any goodwill impairment will be recorded as a cumulative effect of a change in accounting principle.
SUMMARY AND OUTLOOK"While the overall pace of business in the quarter remained weak as we expected," Powers said, "some leading indicators did turn positive for the first time in two years. That may result in a stronger second half for the manufacturers that Hubbell serves. We're hopeful, but we remain focused on completing our capacity reductions and other 2002 initiatives. We are also successively implementing our strategic plan with additions to our core business. The LCA acquisition will be a major and immediately accretive step forward. Both programs - repositioning Hubbell's current operations and strategic acquisitions - will position Hubbell for renewed growth."
Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "should", "expect", "might result", and others. Such forward-looking statements involve numerous assumptions, known and unknown risks, uncertainties and other factors which may cause actual and future performance or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include: achieving sales levels to fulfill revenue expectations; unexpected costs or charges, certain of which may be outside the control of the Company; general economic and business conditions; and competition; and the extent to which Hubbell is able to achieve savings from its restructuring plans and the impact of acquisitions.
Hubbell Incorporated is an international manufacturer of quality electrical and electronic products for commercial, industrial, utility, and telecommunications markets. Hubbell Incorporated operates manufacturing facilities in North America, Puerto Rico, Mexico, Italy, Switzerland, and the United Kingdom, participates in a joint venture in Taiwan, and maintains sales offices in Singapore, Hong Kong, South Korea, People's Republic of China, and the Middle East. The corporate headquarters is located in Orange, CT.
HUBBELL INCORPORATED CONSOLIDATED STATEMENT OF EARNINGS (in millions, except per share data) unaudited THREE MONTHS ENDED MARCH 31 2002 2001 ---- ---- Net Sales Electrical $ 193.1 $ 219.3 Power 80.4 88.0 Industrial Technology 28.2 36.8 ------- ------- Total Net Sales 301.7 344.1 ------- ------- Operating Profit Electrical 17.2 20.3 Special & Nonrecurring Charge, net (0.6) - Gain on Sale of Business 1.4 - Power 7.2 7.7 Special & Nonrecurring Charge, net (0.1) - Industrial Technology 1.2 1.9 ------- ------- Total Operating Profit 26.3 29.9 ------- ------- Other income, net (1.0) (1.7) ------- ------- Income before income taxes 25.3 28.2 Provision for income taxes 5.8 7.1 ------- ------- Net income $ 19.5 $ 21.1 ======= ======= EBITDA $ 37.5 $ 44.7 ======= ======= Earnings per share - basic $ 0.33 $ 0.36 Earnings per share - diluted $ 0.33 $ 0.36 Average number of shares outstanding - basic 58,897 58,432 Average number of shares outstanding - diluted 59,511 58,766 HUBBELL INCORPORATED CONSOLIDATED STATEMENT OF EARNINGS (in millions, except per share data) unaudited THREE MONTHS ENDED MARCH 31 2002 2001 ---- ---- Net Sales $ 301.7 $ 344.1 Cost of Goods Sold 225.3 257.6 ------- ------- Gross Profit 76.4 86.5 Special charge, net 0.7 - Selling & Administrative Expense 50.8 56.6 (Gain) on sale of business (1.4) - ------- ------- Total Operating Income 26.3 29.9 Investment Income 1.3 3.4 Interest Expense (2.2) (5.3) Other income, net (0.1) 0.2 ------- ------- Total Other Income (Expense) (1.0) (1.7) Income before income taxes 25.3 28.2 Provision for income taxes 5.8 7.1 ------- ------- Net income $ 19.5 $ 21.1 ======= ======= EBITDA $ 37.5 $ 44.7 ======= ======= Earnings per share - basic $ 0.33 $ 0.36 Earnings per share - diluted $ 0.33 $ 0.36 Average number of shares outstanding - basic 58,897 58,432 Average number of shares outstanding - diluted 59,511 58,766 HUBBELL INCORPORATED CONSOLIDATED BALANCE SHEET (in millions) (UNAUDITED) MARCH 2002 DEC 2001 ---------- -------- ASSETS Cash and temporary cash investments $ 23.9 $ 33.4 Short term investments 55.0 43.1 Accounts receivable (net) 171.3 163.4 Inventories 229.1 242.6 Deferred taxes and other 27.7 25.8 ------ ------ CURRENT ASSETS 507.0 508.3 Property, plant and equipment (net) 256.6 264.2 Investments 92.1 92.5 Goodwill 291.8 267.9 Other 72.5 72.5 ------ ------ TOTAL ASSETS $ 1,220.0 $ 1,205.4 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper and notes $ 74.8 $ 67.7 Accounts payable 58.3 55.5 Accrued salaries, wages and employee benefits 24.6 27.8 Accrued income taxes 45.2 43.7 Dividends payable 19.5 19.4 Other accrued liabilities 70.5 69.8 ------ ------ CURRENT LIABILITIES 292.9 283.9 Long-term debt 99.8 99.8 Other non-current liabilities 83.9 85.2 ------ ------ TOTAL LIABILITIES 476.6 468.9 SHAREHOLDERS' EQUITY 743.4 736.5 ------ ------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,220.0 $ 1,205.4 ========= =========
CONTACT: Hubbell Incorporated, Orange Thomas R. Conlin, 203/799-4293
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